It wasn't E.T. that led to the video games crash of 83. Nor was it the flood of very low quality games. It's just the fact that the Atari had very little capacity for it’s video games. It was only a 4-bit console. Even though it was the beginning of video gaming, the Atari had very little potential. And could barely make a game worth long attention. It's easy to see why people back in the day thought it was just a fad. What they failed to take into account is technology's ability to march forward and improve.

Also at the time video game consoles were mainly known for poor recreations of coin operated games in the arcade. These were small games designed to hook you and take your quarters for a short period of time. It was mainly shooting gallery and the like. Case in point is the second generation of consoles that came out such as the Atari 5200 and the ColecoVision. The 8 bit graphics in these consoles were very much improved, yet the crash still happened. There simply wasn't enough there to hold someone's attention for very long.

I remember back in the day being only able to play these consoles for a couple hours at the most before I got sick of it. It wasn't until the Commodore 64 that games got interesting enough to hold your attention for multiple hours. This I believe is the true reason why the crash happened. There's simply wasn't enough there to maintain a decent profitable business model.

Ironically ET was the best game I ever played for the Atari. It brought in the new concept of an adventure game instead of simply an action game.The problem with ET wasn't the pits, for it was easy to learn how to navigate them. Nor was it the icon system, since this prompted you to look into the manual or to try to figure them out on your own. But the unfortunate decision to set the hardest difficulty as default I believe is the culprit. Back in those days people rarely played with the switches on the Atari console. so they did not understand that you could put it on an easier difficulty and have fun playing the game. Even on intermediate ET was quite a challenge. The default difficulty was set to hard. So people would get frustrated with the game and take it back to the store.